THE WHITE HOUSE
Office of the Press Secretary (Manila, Philippines) ________________________________________________________________________ For Immediate Release November 25, 1996
PRESS BRIEFING BY SENIOR ADMINISTRATION OFFICIALS
SENIOR ADMINISTRATION OFFICIAL: I think it's pretty clear from some of the reports some of your colleagues are doing that we have done a lot of work on the Information Technology Agreement and working toward a tariff-free environment on information technology, and that includes the components -- electronic components such as semiconductors as well as fax machines, software, computer hardware, telecommunications devices and switches, not the service itself.
And the President did a great deal of work on that yesterday, beginning at the start of the day with his bilateral meeting with President Ramos and going all the way through the day. And I think it has shown in large measure the leadership that he brought to bear and the use of the relationships that he has developed over a long period of time, especially the one with Prime Minister Hashimoto.
But I think something that could be overlooked in this is the tremendous effect this has on economies and what this sector really means. And for that reason, I have asked a senior administration official to come over and talk to you a bit about just what this sector means and the impact that tariff-free trade in that area could have on the American economy and on trade in the APEC area over the next several years.
So I would like to turn the lectern over to my colleague.
Q Will you be available to talk a little bit more about the evolution after that?
SENIOR ADMINISTRATION OFFICIAL: Yes.
Q Is this being piped back to the briefing room or --
SENIOR ADMINISTRATION OFFICIAL: I don't believe it is.
SENIOR ADMINISTRATION OFFICIAL: Okay. Let me just remind you -- I'm sure you've heard all of these facts -- this region is very big. It's very important to our future. It is growing faster than any other region in the world. The barriers here are some of the most difficult in the world. And that's why APEC has been so important to the President. That's why securing the strong endorsement of an information technology agreement is so important both for the U.S. economy and for the region.
Just to remind you, this is a region with a population of over 2 billion and $16 trillion of annual income. That's a big number. It accounts for more than 45 percent of world trade and that's growing. U.S. exports to the region are huge. Over $360 billion last year. That's over 60 percent of U.S. exports are going to this region. And to Asia, the Asian members of APEC alone, our exports are already 60 percent greater than our exports to the EU. That's why we all -- the President, his administration -- spend a lot of time and effort making sure that our companies have access to this region, making sure that markets are continually being opened to this region.
That's also why achieving the strong endorsement of APEC leaders of the Information Technology Agreement is so important. The Information Technology Agreement will substantially eliminate tariffs around the world on products from semiconductors to software, computers to telecom, faxes to modems. These products are the infrastructure, the bridges, the highways, the roads of the 21st century. This is an enormously important sector from the point of view of the future dynamism of our economy.
There has been enormous growth in this sector worldwide. In terms of trade alone, exports, trade in this sector worldwide have grown from $350 billion at the beginning of the decade to $500 billion in the middle of the decade last year, and is expected to approach $800 billion by the end of the decade.
Overall production in this sector is $1 trillion. The ITA will amount to a giant tax cut in this sector. That's important both on the production and export side; it's also important on the import side because these are the components that are so important in the competitiveness of other export sectors. The automobile industry is the biggest user of semiconductors, for instance.
Now let me talk a little bit about why is this so important for the U.S. We're enormously competitive in this sector already. We've got $100 billion worth of exports a year in this sector already. That's twice as much as our automobile industry. That's nearly four times as much as our aircraft industry. We've got 1.8 million American workers in this sector in the United States. Again, it's more than both the aircraft and automobiles combined. And those are in general very good jobs, paying 16 percent higher wages than on average. So this is an important sector to our economy and we're doing very well in it.
We're already number one in many of these sectors. We're number one on semiconductors. We're number one on software. We're number one in telecom equipment. We're number one in computers. As a matter of fact, we dominate 75 percent of the global software market. So U.S. firms are already extremely strong in these sectors, and we stand to gain a lot from tariff reductions around the region.
I just want to give you one or two examples. In the case of computers, for instance, computer tariffs on average, in China, Thailand, Philippines, Indonesia, are 20 percent. That's about seven times higher than in the United States. And our companies are poised to take advantage of the tariff reduction that the Information Technology Agreement would bring.
There is another area, semiconductors, in which tariffs in Europe are 14 percent compared with zero tariffs in the United States. Again, if we manage to secure an Information Technology Agreement in the WTO in December, that will be tremendously significant for our very competitive semiconductor firms.
But I also want to stress one last thing because this has been portrayed as something that would disproportionately benefit the U.S. APEC, the Asian region, the ASEAN members of APEC, APEC as a whole stands to gain enormously from conclusion of an Information Technology Agreement in the WTO. APEC already accounts for 80 percent of world trade in information technology equipment. And just to give you an example, ASEAN exports $30 billion worth of information technology products to the U.S. and $12 billion worth to Europe, a region that has just as big a market, and presumably as they bring their tariffs down should be importing just as much from the ASEAN countries. So this is something that's in everybody's interest.
In terms of -- given the size of this, given the importance of this to the region, when President Clinton came here it was very clear this was a very important initiative for him, and it was important for him to bring all the APEC leaders with him. This is something that he's worked a lot on over the course of the year with the officials of the Philippine government. And starting with his meeting yesterday morning with Philippine President Ramos, it was clear that we were going to get a lot of help from President Ramos. This was something which is his initiative as well. This is something on which he has shown tremendous leadership. And he and the President worked very closely together.
As was said earlier, he also met yesterday with Prime Minister Hashimoto, and the two together worked this issue very effectively. I think one of the things that you see coming out of the leaders with such a ringing endorsement of this agreement is that given the President's four years' worth of relationship building in this region, the trust and confidence that he has built up over time -- many of these leaders he has been working with now for four years; some of them for slightly less than that -- there is a lot of trust in his ability to bring things along and bring things to conclusion. And so there were a lot of leaders that were happy to move forward with him and to come out with a very strong statement on this issue.
Q Can I follow up just on that? You say it was a ringing declaration. Is the fact that it says "eliminate substantially," is that softer, that it doesn't just say "eliminate" the tariffs. Is that a word we wanted in there?
SENIOR ADMINISTRATION OFFICIAL: "Eliminate substantially" we think gives us what we need in terms of this commitment to really go to zero on tariffs in this sector on a variety of products. And we're going to be seeking the broadest possible product coverage. So I think we feel comfortable with that wording. I think it's wording that's been used in the past, on the Uruguay Round, on zero-for-zeroes. I think this was something that we felt very comfortable with. And I think the meaning of the statement is very clear. What we're talking about is free trade in this sector.
Q -- what we wanted all along is eliminate -- total elimination by the year 2000, right?
SENIOR ADMINISTRATION OFFICIAL: We've been very clear that what we want to do is achieve free trade in this sector by the turn of the century. We've also been very clear that we understand countries have different circumstances, different products, and so we've always talked about flexibility on staging, et cetera. But, yes, we very much want to see an Information Technology Agreement that really does achieve free trade.
Q -- products itemized in this statement?
SENIOR ADMINISTRATION OFFICIAL: No. None of the product coverage issues, none of the staging issues were set for or ripe for discussion at this meeting. That's really something that is technical; it requires technical level negotiations in Geneva. And even if we had wanted to do it here, most of that work would have been done in Geneva through the WTO. That's something that needs to be worked out by the -- towards the WTO Singapore ministerial. That's not something that we were hoping for at APEC.
Q The wording "eliminate substantially --"
Q Can you repeat the questions? If this is being piped into the filing center, they won't be able to hear us asking questions.
SENIOR ADMINISTRATION OFFICIAL: Certainly.
Q Okay. But the wording "eliminate substantially," that was not -- was that our proposed -- the U.S.-proposed language, the word "substantially."
SENIOR ADMINISTRATION OFFICIAL: Yes, we're very comfortable with that language. We're very happy with the language.
Q Can you give us an idea of some of the countries that were opposed to this? I mean, that had to be won over.
SENIOR ADMINISTRATION OFFICIAL: That were opposed to the initiative?
Q Well, that had to be won over.
SENIOR ADMINISTRATION OFFICIAL: My sense is that at the leaders level we really had a tremendous amount of support for this initiative. I think it took some work, but again, let me just stress, ASEAN has $30 billion worth of exports to the United States and $12 billion worth of exports in these products. From --
Q But wait a minute, if there was so much support, this would not have been a contentious issue until 24 hours before the summit. Obviously there were some heads of state, developing countries, that did not support it. How were they won over? I mean, if there was so much support --
Q Actually, who were these -- if you've negotiated this triumph, who did you negotiate with?
SENIOR ADMINISTRATION OFFICIAL: I think that it was fairly clear to most of the countries in the region that they stand to gain tremendously from this agreement. I don't think it's -- I would prefer not to go into the specifics of the negotiations. But I would say that different formulations were tried. The biggest concern was over the issue of flexibility, and we've always been very clear that flexibility would be important to making this agreement come together. And I think as long as we had established that principle, that there was tremendous support for this initiative.
Q Can you go into the timing a little bit? When was this language that we see here finally hammered out? When was it reached?
SENIOR ADMINISTRATION OFFICIAL: The leaders declaration language is something that's always worked on. As you know, it's something that the host country really has ownership of. It's not something that is negotiated the way a general agreement would be negotiated. So this language has been evolving over the last several days. Obviously the outcome of the ministerial had some impact on what the leaders were willing to contemplate. I think there was a real sense that leaders should go beyond ministers, that leaders come here because they're able to lead and they're able to go forward and move ahead of their ministers.
Q I understand that and I understand it evolved. But when was the final evolution on this? The wording that we see here, when was that locked in? This was today? Was it last night?
SENIOR ADMINISTRATION OFFICIAL: I think it was worked on over the course of the last several days and quite intensively over the course of yesterday. But it's been locked in -- normally leaders meet the evening before and discuss language. I think everybody felt very supportive of it by yesterday evening.
Q So at midnight this was locked in?
SENIOR ADMINISTRATION OFFICIAL: Earlier than midnight.
Q What is flexibility? What do you mean by flexibility? Does that mean it's not a commitment then?
SENIOR ADMINISTRATION OFFICIAL: Flexibility means that individual countries might have to have slightly longer phase-ins for certain products. It's a standard trade term.
Q When would you estimate we are going to get some hard numbers on when -- on individual products and individual companies? You talked about the Geneva process, but when --
SENIOR ADMINISTRATION OFFICIAL: The next focal point for this initiative is clearly going to be the WTO ministerial that occurs in Singapore in December. And I think we'll know a lot more then about how much agreement there is on specific products and timing.
Q Did this come up at all last night at the dinner? You said it was cemented in before midnight. All the leaders were together last night at dinner. Was this -- at dinner last night? Was it brought up at the dinner by the President?
SENIOR ADMINISTRATION OFFICIAL: No. This is something that leaders all felt comfortable before they walked into the dinner last night.
Q Did the United States give up on any areas where it was reluctant to cut back tariffs as kind of a trade-off to get this?
SENIOR ADMINISTRATION OFFICIAL: This is not a tariff package. It's not a sort of sign-on-the-dotted-line tariff deal, so there was no real giving up or concessions. This was not the negotiation -- I think it's really important to stress that. There is a lot of work that will still need to be done. This is something that we want to gain WTO-wide support on. It's very important to have other WTO members on board. So this was not the right forum to do that in. So it's not really a relevant issue.
Q Take out the comment "trade-off"; was there any areas in which the United States came into this whole process where it did not -- where it was reluctant to cut back on tariffs and it agreed to go beyond where it might have been -- it might have --
SENIOR ADMINISTRATION OFFICIAL: There were no discussions about it at this meeting, no.
Q Can I ask you, on the final words on that, the "recognizing the need for flexibility as negotiations in Geneva proceed," what exactly -- does that mean that some of them -- some countries don't have to reduce their tariffs? I'm not --
SENIOR ADMINISTRATION OFFICIAL: Again, that's a sort of trade term of art. What it means is that countries are going to have to negotiate specific phase-ins on specific product lines on a tariff-line-by-tariff-line basis. But again, that's something that's going to happen in the WTO process, and it's a sort of standard trade negotiating process that will need to take place.
Q I'm a little confused. The President had a meeting with Ramos yesterday and this was brought up and agreed we're going to push harder for the 2000 time. Who went to developing nations that have been the ones that have been standing in the way of this? Did Ramos then go to some of the nations to push harder?
SENIOR ADMINISTRATION OFFICIAL: There was a tremendous amount of discussions back and forth among leaders yesterday, among a whole variety of leaders. I don't even think I could begin to describe to you all the discussions. As you know, a lot of bilateral meetings go on on the edges of the APEC meeting. I'm not even aware of most of the meetings that took place. But there were a number of countries who were extremely helpful and there were a variety of discussions -- again, which I'm not even -- some of them which I'm not aware of, but in that process we certainly had a lot of support from a variety of countries. And I don't want to make that distinction between developed and developing, because I don't think that is the right way of thinking about it. That was not -- that is not a dividing line in this region. There are developing countries in this region who are doing tremendously well in the information technology sector. This is a sector which benefits countries at a whole variety of levels of development, so I don't think that's the right way of thinking about this agreement.
Q Did the President have discussions with other leaders besides the four he had bilaterals with on this issue? Did he have any phone conversations with any other leaders, pushed them on this issue?
SENIOR ADMINISTRATION OFFICIAL: The President had a lot of -- a lot of work to do with his four bilaterals yesterday, so his time --
Q You said there was a lot of talk going on --
SENIOR ADMINISTRATION OFFICIAL: His time was primarily taken up with his four bilaterals yesterday.
Q Primarily. I mean, were there other conversations the President had besides the four bilaterals on this issue, with other leaders?
SENIOR ADMINISTRATION OFFICIAL: There were a number of informal conversations that took place, but I'm not in a position to give you chapter and verse on that.
Q -- by the President with other leaders?
SENIOR ADMINISTRATION OFFICIAL: I'm going to leave it right here at that. One other point that I would make, we don't want to oversell or undersell what's been done here. This is a very important move. My colleague has described in some detail what the sector is about, what the potential is, where the sector fits in both the APEC economies and in the larger world economy. I think the best way to understand what's been done here is perhaps an analogy to what was done in the G-7 just before the conclusion of the Uruguay Round. It was a push -- a political and economic push that was done by the leaders there which resulted in the conclusion of the Uruguay Round.
This has the potential, and we believe will have the effect, of being the political and economic push that's needed to bring the WTO to bring this agreement to fruition in the time that's laid out. And so I think that that's the context to view this in, that it has the potential for sealing the WTO and moving forward -- moving into the negotiating stage and what could be some very significant negotiations to take place over time.
I've just been slightly corrected or added to here. In addition to the G-7, there is also the history that APEC has of having pushed in Seattle to bring the Uruguay Round to conclusion as well. So there is a repetition of history here and a repetition of very positive history, we hope.
Q I should know the history better than this, but how long has this dispute been sort of there on the -- festering or on the back burner?
SENIOR ADMINISTRATION OFFICIAL: I wouldn't -- don't look at this in terms of a dispute. This issue is -- we have been beginning this push since the end of the Uruguay Round. And this is a very effective vehicle for pushing forward. The first ministerial of the WTO will be in Singapore in December, so this --
Q Would it be fair to say -- people have talked about the benefits of APEC being that leaders can do things that the ministers can't. Is this a fair example of that, that the leaders can give a push to this?
SENIOR ADMINISTRATION OFFICIAL: I think that the ministers did a lot of work on this, but I think it's clear that the leaders pushed it over the top.